April 2006

Summing Up - The China Dilemma for U.S. Fir ms: Comply, Resist, or Leave?

The jury is in. Nearly all respondents to this month's column would advise U.S. firms such as Yahoo, Google, Cisco, and Microsoft to continue to operate in China despite the government's possible use of their content or technology to invade the privacy of its citizens. But about half would advocate a discontinuation of operations after attempting unsuccessfully to resist meeting government demands for private information. Some suggested more complex strategies.

Among those in favor of staying and trying to reach some kind of accommodation were Sandi Edgar, who commented, "If Google ended its service to China, China would respond by creating its own version of Google." Jack Carpenter advised, "If an organization is serious about doing business in China, it must 'ride out' all government restrictions. Things evolve fast in China. . . . Flexibility in building a position is necessary." Michael Peng concurred: "If U.S. firms choose to leave, they not only lose China's market, but also the chance to make an impact in China." Linda Sun added, "Having worked in China . . . , I know the best course is to comply initially to gain the trust of the authorities, and then to suggest changes and modifications."

Others advocated more vigorous actions and, if necessary, departure from China. Matt Deter commented, "If Yahoo and Google want to change China, they need to work against the system, not within it." Suraj Babalola wrote, "I would be very happy if both Google and Yahoo resisted these constraints. The real bottom line is people, no matter where they reside. . . . Please do not limit this discussion to China." Nicole Herbots put it this way: "Our truest self-interest is in the end always the ethical choice of resisting or leaving, as we will be inevitably be the next victims of the repressive policies we did not confront but ended up supporting by complying."

Some offered more highly-textured advice. Saurabh Gautam said, "Comply, resist or leave are strong, close-ended options. . . . I do not see any threat or moral hazard when the service provider makes clear to its customer the potential threat of use or sharing of the information by the intelligence or other authorities. Forewarned is forearmed. . . . As in Buddhist philosophy, follow the middle path and take baby steps." Gaurav Goel agreed: " . . . the solution is to make sure customers are aware that they are being watched or are being stopped from accessing particular information. Who knows? This may lead to a change in local policies toward a better world." Surya Deva commented, "Except Cisco, the other three companies could have provided services to Chinese customers without physically locating their servers in China."

After reading the March column, one of my Chinese students asked me if enough consideration is being given to legitimate reasons for actions of the Chinese government. David McKnight's comments reflected a similar need to take into account Chinese officials' views: "A far smarter approach is to evaluate the ethical impacts of Chinese law on a company's business model, and determine how to meet both ends. . . . They (the companies) can start lobbying for reforms that make sense to all parties—because frankly until it makes sense to China, it's not going to happen." What do you think?